As I See It: Why breaking up Google or Facebook won’t solve anything

Peter Morici

Friday

Jun 28, 2019 at 12:42 AMJun 28, 2019 at 12:42 AM

Democrats in Congress with help from a few Republicans are eager to abuse antitrust enforcement to curb Big Tech — Facebook, Apple, Google and Amazon (FAGA). This would be a terrible abuse of the law for problems where bigness contributes little and breaking them up won’t solve much.

To get one gripe off the table — the increasing size of American businesses has not caused stagnant wages. Most polemics on the subject show that big firms own a larger share of the U.S. market these days but most compete on the global stage where heft is needed to survive against the huge marketing and R&D budgets of Huawei, Tencent and others.

Amazon employs the most low-skilled workers, and pays $15 an hour without prodding from Mayor de Balsio. New York bodegas required the jackboot of state law to belly up to his idea of fairness.

The more fundamental complaints against FAGA are privacy — tracking user web travels, purchases and physical movements to hawk products, fake news from malefactors like the Russians, price gouging and bullying smaller competitors.

Websites of all sizes harvest data and it’s wrong. Square, the folks that make handy devices for swiping credit cards, recently sent emails with news of a woman’s impending divorce after she paid an attorney a retainer. It also likes to send information about obstetrician visits to wholly uninvolved parties — all, unapologetically, in the name of making a buck!

Busting up Google or Facebook, or splitting off Instagram or WhatsApp, won’t fix that. Congress passing a law similar to the EU General Data Privacy Regulation, which requires that users know, understand, and consent to the data collected about them, is closer to the answer.

Facebook is a natural monopoly and Google’s search engine comes close. Folks are going to gravitate to the platform with the most participants and then eventually all users. This “network effect” requires regulation like the above mentioned EU rules or outlawing platforms where folks congregate to post news — the latter has serious First Amendment consequences.

Fake news would be just as easily propagated — and much tougher to screen and regulate — on a more fragmented web through web crawling bots, whose messages smaller firms would have fewer resources to screen. The real problem is what to censor without, again, tripping over the First Amendment.

Apple has taken hellacious price increases, and its share of the global cell phone market, 12 percent, is hardly dominant. Consequently, new iPhone sales are sluggish.

It is the target of a class action suit for taking 30 percent of the revenue from sales on its App store and limiting apps used on its phones to those sold through its stores. Many retailers markup wholesale prices by more, and Apple earns much of its profits, not by selling users’ personal data, but through those fees. It further protects privacy by screening who can do business on its phones.

As for Amazon’s monopoly pricing — it has only about 5 percent of the total retail market—and you try consistently beating its prices, especially including the cost of driving to stores which may or may not have the item you want on the shelves.

As for abusing its suppliers through the information it gleans about their sales on its platform and then establishing competing brands, Amazon offerings often sport lower prices—just like supermarkets’ house brands. And it has greatly expanded the market for authors of books, who in the past, have been subject to political and cultural screening from politically correct, Ivy League educated editors.

Now for Google — most everyone has been aghast by the growth of its ad businesses — at the expense of local radio, TV, magazines and newspaper. Take a hard look — web streaming content is killing TV’s grip on prime-time viewers, and the Wall Street Journal, major city dallies and instantaneous web access to news are bludgeoning the six o’clock news, weekly printed matter delivered by mail and smaller newspapers whose only grab on readers are little leaguer scores and bake sales.

And now Google’s ad business is threatened by Amazon and individually targeted TV ads on streaming platforms.

Democrats like to behave like God — dictate behavior right down to your private thoughts — and as any social philosopher knows, you can’t have God without the devil. For Elizabeth Warren and her fellow travelers, this week’s Satan is FAGA.

Peter Morici is an economist and business professor at the University of Maryland and a national columnist.

Peter Morici

Professor

Robert H. Smith School of Business

University of Maryland

College Park, MD 20742-1815

703 350 9701

Twitter: @pmorici1

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